9. Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage for $1,250,000 with...
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9. Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage for $1,250,000 with monthly payments. Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B does not require to pay any fees upfront. Assuming Ann plans to make payments for 2 years and then immediately pay the remaining balance, what should be the interest rate on mortgage B to make Ann indifferent between these two mortgages? Hint: Ann only cares about IRR, so she is indifferent if IRRs are the same. 9. Ann is looking for a fully amortizing 30-year Fixed Rate Mortgage for $1,250,000 with monthly payments. Mortgage A has a 4.38% interest rate and requires Ann to pay 1.5 points upfront. Mortgage B does not require to pay any fees upfront. Assuming Ann plans to make payments for 2 years and then immediately pay the remaining balance, what should be the interest rate on mortgage B to make Ann indifferent between these two mortgages? Hint: Ann only cares about IRR, so she is indifferent if IRRs are the same
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